Biggest & Best House in C- Neighborhood - Sell or Keep as Rental?

[Julian Martinez]

We are debating between selling our first primary residence or keeping it as a rental. It's a beautiful custom home, one of the biggest and easily one of the nicest homes in a so-so neighborhood of Oakland, CA (i.e. "biggest house in not the best area").

I could really use some advice on best strategic investment decision here- if you were in my position would you sell or keep as rental? 

For context, here's the home https://www.zillow.com/homedetails/943-34th-St-Oakland-CA-94...

We bought it as our primary in 2014 for $590k and realized a nice run up in appreciation over the last decade, appraising most recently in 2022 for $1.2m. 

The home is in a C- to B neighborhood, depending on the person. For me personally, I consider it a B neighborhood because it's walking distance to so many amenities, and I felt mostly safe raising my family there, but not everyone is comfortable living in a developing area.

Last year (2024), we moved out of the home and converted it into a rental. We were able to rent it out for $4,750/month the first year but the tenants moved out at end of lease in October, and we've been trying to fill the property since. The Bay Area rental market has softened, especially in Oakland, so we are not able to get $4,750/rent right now.  

I'm trying to decide the smart investment decision - continue renting it out at a lower rental rate OR selling it and trying to find a potentially better performing asset to re-invest those funds in.  

Our loan balance is $640k (rolled a HELOC that we used to buy a triplex into the primary mortgage back in 2020) on a 30-year fixed @ 2.85%. So our PITI on the home is $4,020/mo.

Keep as rental- Market comps suggest a wide rental range - $3,800-$5,000+. We initially listed it at $4,795, but got no interest. We've had to keep lowering the price to where we're currently listing at $4,295/mo, which is generating some interest. I just received an application from someone who meets the income requirement (3x rent) but not the credit rating requirement. But it is not an easy home to fill given the rental rate is above average for the neighborhood (but well below average on a $ per sq ft basis). 

Vs. 

Sell the home- I would keep the home vacant and wait until spring season to sell. It’s hard to tell how much it would sell for if we wait for spring 2025- the Bay Area market has seen some softening, but unbiased, the home is AMAZING. Everyone who steps inside is wowed by the space and in awe of the 2-story wall of windows surrounding a 140+ foot redwood tree. You really don't see many homes like it.

And it's in a super convenient, central location, closer to downtown San Francisco than most of SF neighborhoods, and easy access to the whole East Bay. But again- the neighborhood is not for everyone. 

We’ve already benefited from the rapid appreciation and from here on out, I think it will be flat or very modest growth. We're still within the 2 of 5 year capital gains exemption period, so if we sold, we'd be walking away with $400-$600k mostly tax-free. 

So I’m trying to see if I take that equity off the table and re-invest the sale proceeds in another market across more doors where we’ll see better appreciation, OR if we continue keeping it as a rental and work on principal pay down even though the rental price has been coming down and the home is not the easiest to fill because of the above average price for the C- to B neighborhood.

Ultimately, my stated goal has been to build appreciation (over cash flow) by acquiring 1-4 doors per year for the next 10 years to allow my wife to retire (or be work optional) by the time she's 50. I'm a real estate professional and she's a high income earner, so together, we're able to take advantage of some great tax strategies through real estate. 

Any advice or opinions would be appreciated. Thanks so much in advance.